Russian involvement in Kyoto should boost CDM and renewables markets

Russia could ratify the Kyoto Protocol by the end of the year, according to Deputy Prime Minister Alexander Zhukov.

The government approved the Protocol last week (see related story) and the decision for final approval has been sent to the State's lower house, the Duma.

Mr Zhukov said that discussion could start later this month and the full ratification process be complete by the end of the year. The government has already instructed its ministries to prepare for the Protocol and given three months for them to draw up the guidelines for mechanisms to implement the agreement.

Commentators around the world have been highly optimistic about the knock-on effect that Russian involvement will have on other sectors of the economy.

Kate Hampton of Climate Change Capital, a specialist merchant bank, told edie that Russia's announcement had already had a major effect on the price of carbon and that there had been a flurry of activity on the carbon markets.

"What this really gives us is an increased sense of certainty in the emissions markets. It was already underway in Europe, but now the more reticent governments will also have to start taking this seriously and look at new ways of meeting their emissions targets." She added that it should trigger longer term negotiations and see a greater international demand for Kyoto credits, creating more opportunity to trade.

Marianne Osterkorn, International Director of the Renewable Energy and Energy Efficiency Partnership (REEEP), agreed that this would have a positive effect on the emissions trading system: "Russia's announcement sends a very important message about the emissions trading system. It will strengthen the market and guarantee its continuation after 2008."

She told edie that it would increase worldwide liquidity in the carbon market and stabilise the environment for investing in CDM projects. "I have just returned from a meeting in India with Margaret Beckett and there was huge interest in CDM, particularly in hydro power," she said. "There are 75 projects in the CDM pipeline but Russia's involvement in the Protocol should provide the boost they need to really get moving."

Ms Osterkorn said REEEP was looking at a number of ways to make financing easier for CDM projects - particularly small scale, off grid rural schemes - to increase interest from private companies.

The Australian Wind Energy Association released a statement saying Russia's involvement had the potential to unlock massive investment in renewable technologies. Australia, however is likely to miss out on any boom as the recently re-elected Prime Minister John Howard is adamantly against signing the Protocol and won't increase the country's renewable energy targets beyond a notional two per cent.

Corin Millais, CEO of the European Wind Energy Association, told edie that Russian ratification would probably only provide a very small boost to annual installation of wind farms.

"It is regulation for renewables that drives the market rather than the Kyoto Protocol. However, what Russian ratification will do is provide a massive psychological and political boost which is very important," he said.

Thirty environmental groups have sent a letter to congratulate President Putin for his decision to seek approval for the Kyoto Protocol, and have sent a second one urging US President George Bush to "follow the example".

Spearheaded by the Sustainable Energy Coalition, the letters noted that: "By not being a signatory, the United States now faces the very real possibility of putting itself at a serious competitive disadvantage in the world marketplace."

"Furthermore, carbon trading and incentives to install renewables and other clean technologies in the treaty will give companies in Europe and elsewhere a financial advantage in joint trading agreements with former Eastern bloc and developing countries."

All commentators will now have to wait on the result of the Russian vote. However, its outcome is almost certain as the President Vladimir Putin once again gave his unambiguous support for the Protocol during a meeting with Canada's Prime Minister, Paul Martin this week.

By David Hopkins


| renewables


Waste & resource management
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